Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages

Last registered on December 06, 2016
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Pre-Trial

Trial Information

General Information

Title
Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages
RCT ID
AEARCTR-0001814
Initial registration date
December 06, 2016

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
December 06, 2016, 6:10 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country
Egypt
Region
North Africa

Primary Investigator

Name
Dean Karlan
Affiliation
Northwestern University
Contact Primary Investigator

Other Primary Investigator(s)

PI Name
Adam Osman
PI Affiliation
University of Illinois - Urbana Champaign
Contact Investigator
PI Name
Mohamed El-Komi
PI Affiliation
American University in Cairo
PI Name
Mahmoud El-Gamal
PI Affiliation
Rice University and James A. Baker III Institute for Public Policy, United States

Additional Trial Information

Status
Completed
Start date
2009-09-01
End date
2010-02-28
Keywords
Finance & Microfinance
Additional Keywords
Microfinance, Rotating Savings and Credit Associations, RoSCA
JEL code(s)
Secondary IDs
Abstract
Microfinance institutions (MFIs) have continued to grow over the past few decades, both in numbers of clients and portfolio sizes. The growth of these MFIs has enabled greater access to credit in many of the world's less developed nations. However, recent studies have shown that very many of the poor - especially Muslims - remain unbanked. Confounding this problem in many Muslim countries is the poor's propensity to reject microfinance, when available, on religious grounds. In this paper we develop an alternative microfinance model which aims to establish credit unions for the poor in which the bank plays the role of a guarantor in the familiar rotating savings and credit association (RoSCA). We test the performance of this model against a stylized sequential Grameen-style microcredit provision in a "laboratory experiment in the field" conducted in poor Egyptian villages. Our model of bank-insured RoSCAs is shown to solve coordination-failure problems that may otherwise prevent the spontaneous development of informal RoSCAs in practice. Empirically, our bank-insured RoSCA model generated significantly higher take up and repayment rates than the Grameen model. This suggests that this model, by overcoming the religious barriers to credit, can be a useful alternative to Grameen-style microfinance.
External Link(s)
J-PAL Evaluation Summary

Registration Citation

Citation
El-Gamal, Mahmoud et al. 2016. "Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages." AEA RCT Registry. December 06. https://doi.org/10.1257/rct.1814-1.0
Former Citation
El-Gamal, Mahmoud et al. 2016. "Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages." AEA RCT Registry. December 06. https://www.socialscienceregistry.org/trials/1814/history/12276
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Experimental Details

Interventions

Intervention(s)
Each session is randomly assigned to be either a Grameen-style game or a RoSCA game. In each game, players are partnered up and Player 1 is endowed with a specific amount of initial capital. Players have the opportunity to make a capital investment, but must take out a loan to do so. If Player 1 takes out a loan, their default or repayment behavior affects the options available to Player 2 in the future, and vice versa.

In the Grameen-style game, players borrow from and are punished by the bank. However, after the first period, players can borrow from each other to repay the bank.

In the RoSCA game, if the players mutually decide to play the game and invest capital, they pay a small fee to the bank upfront which will guarantee the RoSCA against default. Player 1 receives the first RoSCA loan. If they default, they receive a loan from the bank to repay the RoSCA (which they can either repay or default). If Player 1 repays the RoSCA, Player 2 will receive a loan from the RoSCA, and will face the same choices as Player 1.

The games differ because in the Grameen-style game, bank loans occur first, with player support secondary. In the RoSCA game, this pattern is reversed, with intra-player support first, and bank loans secondary. For more detail on the games, please refer to El-Gamal et al. (2015).
Intervention Start Date
2010-01-01
Intervention End Date
2010-02-28

Primary Outcomes

Primary Outcomes (end points)
Proportion of participants who play, Take-up rates, Repayment rates
Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)
Secondary Outcomes (explanation)

Experimental Design

Experimental Design
We conduct laboratory experiments in the field, using very poor subjects in rural Egypt who are eligible for microloans, and compare the take up and repayment rates of randomly assigned subjects under two microfinance designs - a sequential Grameen-style microlending structure as well as our proposed alternative, a bank-insured fixed-order RoSCA. Subjects participated in experimental games, modelled after a Grameen-style or RoSCA loan structure. Subjects who chose to participate in the games kept the money in their possession at the end of the game. After the game we administered, subjects answered few survey questions to gather demographic data for use in our analysis.
Experimental Design Details
Randomization Method
Done in office by computer
Randomization Unit
Session
Was the treatment clustered?
Yes

Experiment Characteristics

Sample size: planned number of clusters
25 experimental sessions
Sample size: planned number of observations
354 subjects
Sample size (or number of clusters) by treatment arms
RoSCA: 15 sessions
Grameen-style: 10 sessions
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
IRB Approval Date
IRB Approval Number
Analysis Plan

Post-Trial

Post Trial Information

Study Withdrawal

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Intervention

Is the intervention completed?
Yes
Intervention Completion Date
February 28, 2010, 12:00 +00:00
Data Collection Complete
Yes
Data Collection Completion Date
February 28, 2010, 12:00 +00:00
Final Sample Size: Number of Clusters (Unit of Randomization)
25 sessions
Was attrition correlated with treatment status?
No
Final Sample Size: Total Number of Observations
344 subjects
Final Sample Size (or Number of Clusters) by Treatment Arms
Grameen-style: 136 subjects RoSCA: 208 subjects
Data Publication

Data Publication

Is public data available?
Yes
Public Data URL
http://erfdataportal.com/index.php/catalog/45

Program Files

Program Files
Reports, Papers & Other Materials

Relevant Paper(s)

Abstract
Bank-insured RoSCA for microfinance: Experimental evidence in poor Egyptian villages
Citation
El-Gamal, Mahmoud, Mohamed El-Komi, Dean Karlan, Adam Osman. "Bank-Insured RoSCA for Microfinance: Experimental Evidence in Poor Egyptian Villages. Science Direct 2014; .doi.org/10.1016/j.jebo.2014.02.025.
URL
http://www.sciencedirect.com/science/article/pii/S0167268114000742

Reports & Other Materials